Member Info for fleccy

Something else to consider is that Vodafone transferred Vodafone Italy's Towers into INWIT around 2019/20, and subsequently transferred their INWIT shareholding into Vantage Towers; So the Vodafone Italy sale shouldn't include any Tower assets if I'm understanding things correctly.

Https://www.lse.co.uk/ShareShortPositions.html?shareprice=VOD&share=Vodafone

"If i had to guess I'd say about 2b Eur, UK is 2.5b but Italy is 2/3 of the size"

Beo no doubt you have a far greater in depth understanding of accounts than I do, but are you overcomplicating something that's simple. Does Italy have any Financial Debt? Because I can't see anything in Vodafone's documentation mentioning any Financial Debt in respect of Italy, with all the Debt accounted for at Group level within the Free Cash Flow calculation.

Italy will have Liabilities, like leases, but they will transfer with the business along with things like Spectrum licences. Is it not reasonable to assume that Vodafone will receive €8 Billion in cash, keep hold of any debt at Group level and Swisscom will take ownership of any Liabilities directly associated with the Italian business onto their books?

In the RNS it says the deal will go through on a "debt and cash free basis ", so I assume Vodafone wont transfer any debt onto the Italian business as part of the deal, and Vodafone will receive any outstanding cash on the balance sheet when the deal closes; So Vodafone will receive sale cash of €8 Billion plus whatever cash may be sitting on the Italian business balance sheet when the deal goes through; With any liabilities, like leases, then becoming the responsibility of Swisscom.

Does that make sense?

Lease Liabilities are accounted for in EBITDAal, so those Liabilities would just go with the business anyway as they are an operational expense rather than Financial Debt.

Beo looking at the segmental results and analysis, they don't appear to allocate Debt to specific businesses within the group, at least I couldn't find any reference to it. Vodafone appear to account for their debt in the Group Cash Flow statement, so Vodafone will receive the full amount under this deal and any debt will likely be accounted for elsewhere.

The Dark Side of the Force is working hard to keep Vodafone's stock price down this morning.

https://www.youtube.com/watch?v=BOUWrW1ZsTE

This explains yesterday's jump in the price, obviously some market participants knew this was coming.

I was actually directing my comment at allybally, in response to his plot thickens comment.

Not really ATUS has nothing whatsoever to do with the vehicle Drahi created to hold his BT stock.

Continued:

"Estimates are based on discounted cash outflows and do not reflect the likely and significant impact of cash inflows generated from the disposal, repurposing or subleasing of properties retained post-2031.

We are permitted to hand a limited number of properties back to the lessor prior to 2031. On initial adoption of IFRS 16 we were not reasonably certain which properties would be handed back and as such the lease term did not reflect the exercise of these options. Subsequently we exercise judgement in identifying significant events that trigger reassessment of our initial conclusion. We exercise similar judgement in identifying events triggering reassessment of whether we are reasonably certain we will not exercise termination options associated with other leased properties.

In doing so we consider decisions associated with our ongoing workplace rationalisation programme, in particular decisions to exit a particular location or lease an alternative property. Generally we remain reasonably certain that we will not exercise a termination option until implementation of the associated business plan has progressed to a stage that we are committed to exiting the property. At that point we reassess the lease term by reference to the time we expect to remain in occupation of the property and any notice period associated with exercise of the option"

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/annual-reports/2023/2023-bt-group-plc-annual-report.pdf

In the 2002 Annual Report BT said; "In December 2001, as part of a wider property outsourcing arrangement, BT completed the sale and leaseback of the majority of its UK properties to Telereal"

They also said; ". BT has leased the properties back at a total annual rental commencing at £190 million and subject to a 3% annual increase. In addition, BT has transferred the economic risk on a large portion of its leased properties to Telereal in return for an annual rental commencing at approximately £90 million per annum". I'm assuming the first year Leases and Rent were £280 Million in the first year and increase annually by 3%, so year two would have been £288.4 million and so on.

In the 2023 Annual report, on page 181, BT said:

"Substantially all of our leased property estate is held under an arrangement which can be terminated in 2031, at which point we may either vacate some or all properties or purchase the entire estate. If neither option is taken the lease continues to the next unilaterally

available break point in 2041. The lease liability recognised for the arrangement reflects a lease end date of 2031.

On initial recognition we concluded that, although the majority of these properties are expected to be needed on a long-term basis, we couldn’t be reasonably certain that we wouldn’t exercise the termination option or that we would exercise the purchase option. In coming to this conclusion, we had due regard to material sub-lease arrangements relating to the estate.

As time progresses our assessment may change; if this happens, we will remeasure the lease liability and right-of-use asset to reflect either the rentals due for any properties we will continue to occupy, or the cost of purchasing the estate, using an updated discount rate. There would be no overall impact on net assets.

If the assessment were to change at the balance sheet date 31 March 2023:

– Exercising the purchase option would lead to an estimated increase in the lease liability and right-of-use asset of between £3bn and £5bn

– Continuing to lease the estate beyond 2031 until the next available break in 2041 would lead to an estimated increase in the lease liability and right-of-use asset of between £1bn and £2bn

Our assessment will be directly linked to future strategic decisions, which will be resolved at some time prior to 2031, around the development of the fixed network and the associated rationalisation of our exchange estate. The breadth of the ranges reflects the significant uncertainty around key variables used to determine cash outflows, especially future inflation and which properties the group will be able to exit prior to or in 2031 "

" So the savings will mostly be on rent/short leases"

That's what I believe, since the lease liabilities form a good chunk of the Net Debt. I'll start a new thread to discuss Lease Liabilities, since they are an important consideration in my opinion.

Drift have you already sold out, or are you planning on selling out? Obviously the markets were closed last night, so when did/will you sell your shares? Or are you just talking your own book to in "pharma and tech to date, hopefully CROWD"? You come across like many of the Motley Fool crew who write articles trashing popular retail stocks, while promoting other less popular stocks in other articles.

"Fast forwarding to 2023 the annual report says that "Property, plant and equipment" is worth £21B but does not break down how much of that is property and indeed how much value will be brought in by that which is being sold. This is what I would really love to know."

Waccy you need to look at page 177 of the 2023 Annual report.

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/annual-reports/2023/2023-bt-group-plc-annual-report.pdf

Land and buildings £449m

Network infrastructure: Openreach (£14.777 Billion), Other Units (£4.435 Billion)

Other £412m

Assets under construction £1.594 Billion

Total £21.667 Billion

"I've googled the heck out of this but am still unclear on whether BT owns its exchanges or not."

That question was answered in the Property thread below, it gives you all the details you need to know. It's explained in the BT 2002 Annual Report:

https://www.bt.com/content/dam/bt-plc/assets/documents/investors/financial-reporting-and-news/annual-reports/2002/bt-annual-report-form-20-f-2002.pdf

Continued:

As far as the Exchanges are concerned, BT has rights to buy the Exchange Freeholds at Open market prices after 30 years, but I read somewhere that BT will instead get a cut from any profits realised from the sale of redundant Exchange buildings; Maybe someone with more knowledge on this could clarify if this is the case?

https://www.bt.com/content/dam/bt-plc/assets/documents/investors/financial-reporting-and-news/annual-reports/2002/bt-annual-report-form-20-f-2002.pdf

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/fy23/q4/q4-fy23-kpis.pdf

The sale and leaseback in relation to the Exchanges is interesting and worthy of discussion.

"BT has leased the properties back at a total annual rental commencing at £190 million and subject to a 3% annual increase. In addition, BT has transferred the economic risk

on a large portion of its leased properties to Telereal in return for an annual rental commencing at approximately £90 million per annum. This is broadly equivalent to the current level of rentals. In February 2002, BT outsourced its property management unit to Telereal."

So in the first year, the leasing cost for the properties sold to Telereal was £190 Million, and year two £190 Million plus 3%. BT also transferred its existing leaseholds to Telereal for an annual rental of £90 Million, and although it doesn't state it, possibly also at 3% per annual increase; if this assumption is correct the year 1 would be £280 Million and year 2 £280 Million plus 3%. If you chart that for lease liabilities in a non scientific and possibly inaccurate way you get:

https://docs.google.com/spreadsheets/d/e/2PACX-1vTW6ina36JYvU7O0hnf8VOM86a9e99Z-2SgQh-zbJpWuXxpGM4qEx94YOLtBEP_1eJ0li7M5012H2Hh/pubchart?oid=492205926&format=interactive

Going off the chart, in 2002 the lease liability was £13,321,116,398 and dropped to £5,291,700,395 by FY23, which is surprisingly close to the reported FY23 Lease liability figure of £5.362 Billion.

Also:

"BT has the option to purchase the reversionary interest

from Telereal (i) when BT vacates a property at open market

value (ii) at the end of 30 years for the specialised estate

(buildings of an operational nature such as telephone

exchanges) at open market value or (iii) if BT wishes to

terminate all arrangements with Telereal at any time, in

which circumstances BT would pay open market values for

the property and compensation to Telereal covering funding

costs and equity return. BT can also re-acquire the

reversion of the general estate (non-operational buildings

such as of®ces and warehousing) at the end of the

headlease term of 999 years. BT has the right to renew the

lease of the specialised estate for successive periods which,

in total, amount to 130 years. After 130 years, the freehold

specialised properties revert to BT. The leases include

normal commercial restrictions and convenants.

BT's divestment of its property estate will provide a

¯exible approach to BT's of®ce arrangements and building

requirements. BT expects to reduce its property needs over

time and the transaction allows BT to vacate properties

covering approximately 35% by rental value of the estate,

including existing lease ends, over the contract term without

penalty"

Don't confuse Verizon Wireless with Verizon communications.

"The shares are undervalued on NAV but the market just keep playing on the poor performance ...and when you see that in H1 they made a loss"

Poker the only reason they showed a loss in H1 is due to the way they allocate Working Capital.

https://docs.google.com/spreadsheets/d/e/2PACX-1vRA1ndHTf_Bz7O_moDxmcbWnEtcusZucUu6lEJvm3O4mGooeH4ErFjRqot3RQHBaVXCgoUED1k2CUVK/pubchart?oid=498591&format=interactive

There'd be less regulatory kickback over a Vodafone takeover than a BT takeover, since Vodafone isn't the number one provider in any of its markets. There may some national security considerations in the UK, due to any Government contracts Vodafone may have in relation to the old CWW network in the UK. If it's a US or European based takeover then I doubt there'd be significant obstacles, if it originates in the Middle East then it's anyone's guess. Because of the time the rumour came out, it feels more like market games, if there's anything behind it we might read more over the weekend. It's also interesting that the market stopped the climb shortly after crossing 66p, and also how quickly seekingalpha released the story following the upward move.